Dollar dragging down beef returns

Workers process beef carcasses at Finegand freezing works. Photo by Stephen Jaquiery.
Workers process beef carcasses at Finegand freezing works. Photo by Stephen Jaquiery.
The outlook for the global beef industry might be positive but New Zealand's international competitiveness continues to be eroded by the relatively high dollar.

The latest Rabobank beef quarterly said export prospects were positive.

Strong demand was likely from the United States and China and supplies from Australia would be significantly tighter.

However, the dollar continued to put downward pressure on returns along the supply chain.

It was expected to trade around the US85c range during the year, which would limit possible gains for both export and farm-gate prices.

Higher returns at the farm gate would, therefore, be dependent on processor willingness to attract additional cattle beyond the usual seasonal culling period, the report said.

The New Zealand beef industry had a positive start to 2014.

Conditions were good throughout most of summer and strong international export demand provided an improvement, after the severe drought conditions of the same time last year.

Total January slaughter stabilised at 242,665 head. Lower cow slaughter was offset by rising bull slaughter levels, resulting in higher farm-gate prices.

With winter approaching, seasonally higher cull cow supplies were likely to build, resulting in gradual downward price pressure and into the second quarter.

Beef exports increased 8% in January to 34,203 tonnes (carcass weight equivalent) and average export returns were up $1 to $5.66kg.

Shipments to China surged to 3233 tonnes, up 23% year-on-year. However, the United States (up 2% to 16,864 cwe) remained the key market.

Poor climatic conditions continued in Australia this year through large areas of Queensland and northern New South Wales, keeping slaughter levels historically high.

Total cattle slaughter in 2013 increased 1.1 million head to 9.1 million, which underpinned record beef production.

January slaughter increased 17% year-on-year to 678,000 head and processing volumes in February and March were also forecast to be higher than last year.

Beef demand growth would continue to come mainly from China, although Rabobank did not expect Chinese 2014 beef imports to reach the growth levels experienced in 2013, which was up 380%.

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